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Exam 13: The Costs of Production

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Question 161

True/False

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Table 13-20 Listed in the table are the long-run total costs for three different firms. -Refer to Table 13-20. Firm B is experiencing diseconomies of scale.

A) True
B) False

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Question 162

Multiple Choice

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Which of the following statements is not correct?

A) In the long run, there are no fixed costs.
B) Marginal cost is independent of fixed costs.
C) Economies of scale is a short-run concept.
D) Diminishing marginal product explains increasing marginal cost.

E) B) and D)
F) All of the above

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Question 163

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Economists and accountants both include forgone income as a cost to a small business owner.

If long-run average total cost is rising, then the firm is experiencing economies of scale.

Figure 13-3 -Refer to Figure 13-3. Assuming that the firm depicted produces cookies, which of the statements below is most consistent with the shape of the total cost curve?

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 5, Q = 125) and (L = 6, Q = 152) . Then the marginal product of the 6th worker is

Jamar used to work as an office manager, earning $40,000 per year. He gave up that job to start a life-coaching business. In calculating the economic profit of his life-coaching business, the $40,000 income that he gave up is counted as part of the life-coaching business's

Which of the following expressions is correct?

Which is greater -- economic profit or accounting profit?

The production function depicts a relationship between which two variables? Also, draw a production function that exhibits diminishing marginal product.

In the short run, if a firm produces nothing, total costs are zero.

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. The implicit cost for one birdhouse is

Suppose a firm currently produces 325 units of output per day with 15 workers. The firm is able to produce 340 units of output with a 16th worker. What is the marginal product of the 16th worker?

Implicit costs are costs that do not require an outlay of money by the firm.

Because of the greater flexibility that firms have in the long run, all short-run cost curves lie on or above the long-run curve.

Suppose that a firm's long­run average total costs of producing an individual income tax return is $75 when it produces 1,000 returns and $75 when it produces 1,200 returns. For this range of output, the firm is experiencing

Carol Anne makes candles. If she charges $20 for each candle, her total revenue will be

A local playground equipment company plans to operate out of its current factory, which is estimated to last 30 years. All cost decisions it makes during the 30-year period

The typical total-cost curve is U-shaped.

Scenario 13-11 Walter builds birdhouses. He spends $5 on the materials for each birdhouse. He can build one in 30 minutes. He is semi-retired but earns $8 per hour at the local hardware store. He can sell a birdhouse for $20 each. -Refer to Scenario 13-11. An accountant would calculate the total cost for one birdhouse to be